Illinois Enacts First Midwest Crypto Consumer Protections

Illinois recently took a significant step forward in consumer protection by enacting landmark legislation aimed at safeguarding residents from the rising tide of cryptocurrency scams. 

Governor JB Pritzker recently signed two bills into law - the Digital Assets and Consumer Protection Act (SB1797) and the Digital Asset Kiosk Act (SB2319) - which together establish some of the first comprehensive regulatory frameworks for digital assets in the Midwest.

The backdrop for this move is stark: Illinois consumers lost a staggering $272 million to cryptocurrency fraud in 2024, according to FBI data, the fifth largest amount of any state in the country. The law is intended to give the Illinois Department of Financial and Professional Regulation (IDFPR) broad authority to oversee digital asset exchanges and businesses, requiring them to adhere to robust consumer protection protocols akin to those found in traditional finance. These include mandates for investment disclosures, safeguarding customer assets, and strict customer service standards. Additionally, companies in the digital asset space must demonstrate financial viability, implement risk management plans covering cybersecurity, fraud, and anti-money laundering efforts similar to those for more traditional financial products.

The Digital Asset Kiosk Act complements this regulatory framework by targeting one of the crypto industry's more vulnerable points of entry: digital asset kiosks. Operators of these kiosks must now register with the IDFPR, provide detailed reports of kiosk locations, cap transaction fees at 18%, and limit daily transactions to $2,500 for new users. Crucially, the law requires kiosks to offer full refunds to new customers who fall prey to scams, an immediate protection designed to restore consumer confidence in this burgeoning sector.

Governor Pritzker framed the legislative measures as "common-sense protections" for Illinois residents. The move comes at a time when - according to the FBI report - their use of crypto and similar technology has been increasing. The state was “sending a clear message that we won’t tolerate taking advantage of our people and their hard-earned assets”, the Governor added.

The laws aim to strike a balance: prioritizing consumer protections to prevent bankruptcies and scams that have marred the digital asset industry nationally, they also include exemptions to encourage continued technological innovation in Illinois. Digital asset businesses have until mid-2027 to register with the IDFPR, in an attempt to give the industry a reasonable window to comply with the new standards.